Oil Has Very Clearly Hit A Medium Term Top
From Taki Tsaklanos: The price of crude is rather flat since December. On Monday, crude oil fell slightly, and lost most of its gains from Friday.
Crude is clearly bumping into heavy resistance. The fact that there is no trend can mean two things: either investors are accumulating and preparing a sharp move higher, or buyers can’t win the battle against sellers.
InvestingHaven’s research team wrote recently Is This The Time To Buy Crude Oil And The Energy Market. In it, the $50 area was identified as an area which has capped crude’s prices from moving higher in recent years. This is an important quote from that article: “The most interesting observation on this chart is how crude is building a base right below that strong resistance area. We have not seen that before. It does not guarantee that crude will break through this area, but it suggests the market is succeeding in such an attempt.”
Right now, we see that the crude investors have still not succeeded in winning the battle. That is becoming problematic as it suggests that selling pressure is too strong. The daily chart makes that point.
Watch how crude is doing something it hasn’t done in the last 12 months: it is trading sideways for two months now. A volatile asset like crude will not trade sideways for a long time. Given the recent pattern of lower highs, the most obvious direction in the short to medium term is south. But that has to be proven and confirmed by the market.
Crude oil’s weekly chart looks very interesting at this point. “We did not expect crude to break through resistance” is what we wrote recently. However, given the 2-month sideways trading, it is now becoming obvious that resistance is too strong. If $52 holds, then crude will likely rise to $60 … BUT if crude cannot break through resistance it would bring a correction in which case investors should watch for a higher low (correction ends above $43 which would be bullish) or lower low (correction ends below $43 which would be bearish).
The United States Oil Fund LP ETF (NYSE:USO) rose $0.05 (+0.44%) in premarket trading Tuesday. Year-to-date, USO has declined -2.65%, versus a 1.31% rise in the benchmark S&P 500 index during the same period.
USO currently has an ETF Daily News SMART Grade of B (Buy), and is ranked #48 of 120 ETFs in the Commodity ETFs category.
This article is brought to you courtesy of Investing Haven.
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